Guest RobinR Posted June 3, 2002 Posted June 3, 2002 A rollover distribution was made from a 401(k) plan. The check was cashed by the institution after the participant decided against starting an account at said institution (changed his mind). The institution then issued a check payable to the original trustee in the name of the plan. The participant signed a 30 day waiver. Can the plan accept this check? Is this a prohibited transaction? In general, are there any problems we need to be aware of? Any input is appreciated.
Guest b2kates Posted June 3, 2002 Posted June 3, 2002 I assume that the person terminated employment to trigger the distribution/rollover payment. Was it a total distribution? if so, likely can not accept back on rationale that individual is not a participant. However, I formerly worked for a bank trustee and on plan sponsor direction many times we did accept such "corrective" payments.
mbozek Posted June 3, 2002 Posted June 3, 2002 Robin:Could you give a complete explaination of what happened. Did the participant rollover distribution to an IRA? did the receving institution open an IRA for the participant? If not have more than 60 days go by since the distribution was made. What do you mean by "the institution cashed the check but individual decided against starting the account?". How is the receiving institution going to report the receipt of the IRA distribution? as a rollover (which is not possible if an account was not opened for the emplyee.) How can the receivng institution cash the distribution check and make a check payable to the trustee of the distribtuting plan without opening an IRA? It seems to me that if the receving institution cashed the check but did not open an IRA for the part. then the amounts are in a taxable account. Why is it necessary to sign a 30 day waiver? I dont know why the distributing plan would want to accept this distribution because of all the tax issues, e.g., is the distribution taxed to the employee since it was never accepted by the IRA custodian but the check was cashed. mjb
Guest RobinR Posted June 4, 2002 Posted June 4, 2002 Thanks for the help, the trustee is not accepting the returned check.
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